Falling cannabis prices are straining smallholder farmers – Times-Standard
Humboldt County cannabis growers are drowning in a flooded market. As the price of cannabis continues to fall, smallholder farmers struggling to stay afloat fear for the sustainability of their future.
Jason Gellman, a second generation cannabis grower and owner of Ridgeline Farms in South Humboldt, has been observing the evolution of the cannabis industry since he was a child. He admitted he has an advantage because his brand is well known throughout the region and much of the state. Even still, he said he was having trouble selling his crop.
“Times are really, really tough for small farmers,” he said. “Most of us are in the red right now and if you’re lucky enough to sell your product, it looks like the average price per pound is around $ 700, which is pretty low. The county wants their money, the state wants their money, the banks want their money, tailors have to be paid and all the other fees. For a small farmer, it costs around $ 500 to grow a pound. It’s barely paying the bills.
In June, the wholesale price of cannabis from last year’s crop fell by about $ 1,200 a pound when the 2021 light deprivation or “dep” crop began to hit the market, according to the report. Executive Director of the Humboldt County Growers Alliance, Natalynne DeLapp.
“The wholesale price for deps 2021 is between $ 650 and $ 750 a pound,” she said. “The wholesale price for 2020 AAA-grade flowers is anywhere from $ 400 to $ 500 per pound, if not as low as $ 200 to $ 400 per pound. Some farmers are having their 2020 crop returned by distributors because they are unable to sell it. This is after paying for pruning ($ 70 to $ 200 per pound), testing, and paying state crop taxes ($ 154 per pound).
DeLapp attributed the dramatic drop in prices to “massive overproduction” statewide.
“California farmers produce four to five times more cannabis than our legal market can consume,” she said. “The simple economics of supply and demand shows that when your supply exceeds your demand, prices go down. The question of survival is in question.
Currently, there are 1,775 acres of state-licensed cannabis – 435 of which are in Humboldt County – that conservatively produce over 6 million pounds of cannabis per year, however, California only consumes about 2.5 million pounds of cannabis per year, DeLapp said, citing data from the California Department of Food and Agriculture’s 2017 Standard Regulatory Impact Analysis.
“Not all cannabis consumed in California is purchased from legal retailers, so a very conservative estimate is that we are producing twice what the legal market can consume, but in reality it’s probably worse than that,” he said. DeLapp explained. “Much of this overproduction is attributable to large-scale farms outside the Emerald Triangle, on the Central Coast and elsewhere, where it is common for single farms to be allowed for dozens of acres. These areas continue to bring hundreds of acres of new production online despite the fact that there is no market for new large-scale production.
How did we get here?
To understand how cannabis growers reached this point of overproduction, DeLapp said understanding the history of cannabis in California is essential.
“The cannabis industry has started the process of working with the local and national legislature to develop a regulatory structure for cannabis,” she explained. “Proposition 215 was passed in 1996, which allowed for the humanitarian use and cultivation of cannabis, but it was largely unregulated until the Medical Marijuana Regulatory Safety Act be signed by Governor Jerry Brown in October 2015. ”
Simultaneously, Humboldt County was developing the state’s first Cannabis Land Use Ordinance in anticipation of state legalization, which the Board of Supervisors enacted in February 2016. As of August 2016, more than 2,500 pre-existing farms had signed with the county and initiated the process of compliance.
Proposition 64 legalized the recreational use of cannabis in November 2016.
“Support. 64 removed the ban on vertical integration and also promised the cannabis industry that unlimited cultivation would not be allowed until 2023,” DeLapp said. “… As of January 2018, the cap When that acreage cap was removed, it allowed CDFA to start accepting stacked licenses, which allowed these very, very large farms to come online. When we ask why there is an overproduction problem, it is because of prop. 64 and the removal of the acreage cap which has failed to curb cannabis production in the state of california.
From 2023, the state will allow the issuance of even larger “Type 5” cultivation licenses. Gellman worries that this change will open the door to unlimited cultivation.
“We have to stay the course on prices, there has to be a cap on square footage or a cap on licenses,” he said. “If the state allows unlimited cultivation in 2023, we can just say goodbye to this industry, but for now we still have a chance to fight. “
Calls to action
As small farmers like Gellman demand an acreage cap, DeLapp looked at a shift in strategy and called for short and long term solutions to better support small farmers.
“The light at the end of the tunnel is interstate and international commerce,” DeLapp said. “We’re still probably two or three years away from that, so the big question is how the county can help farmers keep their heads above water until then, and how we can use the time we have.” to create a brand of artisanal Humboldt cannabis. so that we are ready to go when these new markets open up.
The Humboldt County Grower’s Alliance hopes to win the bid to market the county’s cannabis. DeLapp said the best thing the county can do to build the industry’s long-term resilience is to do everything it can to develop their organization’s strategy.
“Humboldt’s cannabis companies cannot compete in a commodity market,” she said. “What makes Humboldt special is our land, our history and our history – which cannot be replicated elsewhere.”
As the county strives to meet these goals, farmers need help.
“Humboldt County seems to be one of the hardest counties to get your full permits. This resulted in so much cost and so much money that we had to invest in the authorization process which drained a lot of our savings before that, ”Gellman said. “I still haven’t completed all of the county’s license requirements after six years and have a farm (9,600 square feet). … Looks like everyone’s taking from the farmer and we’re not getting the money back.
Every dollar counts, DeLapp said.
“The county can support efforts at the state and federal level to provide relief to farmers,” she said. “At the state level, it is essential that the cultivation tax be eliminated – no matter how much the price of cannabis drops, the state still taxes cultivation at a flat rate of $ 154 per pound. And at the federal level, we need a legalization bill that recognizes cannabis as an agricultural activity that would offer protection to small farmers rather than pushing the industry towards greater consolidation. “
DeLapp also called on the county to give farmers some leeway to enter into compliance agreements for “big ticket items,” such as road improvements and culvert replacement and for the planning and management department. County Building is reassessing how it charges for cannabis licensing services. .
Gellman agreed, noting the county and state should offer incentives for small farms.
“If you have 10,000 square feet and less, there should be some kind of tax break since you produce less product,” he said. “… There are a lot of very good people who have given all their savings to tidy up their farms and because of that I blame the county as it could have been a lot easier but they continue to take and take. “
As gloomy as it sounds, Gellman has said he has no plans to abandon his farm.
“I’m so invested and this is what I know, this is what a lot of us know and what a lot of us have been doing all of our lives, so we’re not just going to start a new career. all of a sudden in our forties, “he said.” We’re still in a beautiful place, we’re surrounded by friends and family, so we’re going to get there. We will somehow survive. We were very poor growing up in our childhood here and we still had a great childhood, we will just have to change our ways a little bit and make sure we keep the quality of our product, it’s quality rather than quantity.
Humboldt County Planning and Construction Director John Ford did not respond to the Times-Standard’s request for comment before the printing deadline.